A year after losing one of its most lucrative customers, Toronto electronics manufacturer Celestica Inc., (TSX: CLS) appears to be in pretty good shape as it reported second quarter revenues of $1.495 billion – that’s down 14 per cent from 2012 but still higher than the $1.438 billion expected by financial analysts who factored in the loss of contracts from smart phone maker BlackBerry Ltd. (TSX: BB).
“Celestica delivered a solid second quarter and adjusted EPS (earnings per share) about our guidance,” said Craig Muhlhauser, chief executive officer of Celestica, in statement yesterday. “We generated strong free cash flow and improved our return in investment capital, driven by stronger than expected demand in our communications end market.”
Despite what he called a “challenging environment,” Muhlhauser projected continued growth in Celestica’s “diversified end market” for the third quarter.
Back in June, 2012 Research in Motion, announced that it would end its manufacturing contract with Celestica as the then struggling smart phone maker underwent a restructuring program aimed a dealing with its losing market share to Apple’s iPhone and handsets running Google’s Android operating system and developing its new line of BlackBerry 10 smart phones.
“We are making changes to our supply chain as part of wider efforts to improve the efficiency and cost effectiveness of RIM’s operations to help meet strategic objectives and deliver long term value to our stakeholders,” RIM said in a statement at that time.
RIM has since then switched to cheaper suppliers in Asia.
The phone maker was Celestica’s largest customer and accounted for 19 per cent of the electronics manufacturer’s revenue last year which was $6.5 billion
Since then, however, Celestica launched its own restructuring efforts to reinvent itself.
For instance, Celestica has begun manufacturing high-quality solar panels. Making printed circuit boards for other businesses remains the staple of the company but lower cost and higher volume producers from Asia are continually undercutting Celestica.
Celestica has about a 100 other customers, but the company is also keeping a keen eye in developments in communication technologies.
Mike Andre, executive vice-president of the company has the task of transforming Celestica’s Toronto facility for higher margin business. As computing power becomes cheaper and mobile communication becomes more pervasive, he is banking that Celestica can hitch its fortunes in the emerging market these two developments will spawn.